Former McDonald’s CEO Steve Easterbrook agreed to leave the company over a consensual relationship he had with an employee. Now, his abrupt but amicable departure has suddenly become a lot less – consensual.
McDonald’s announced last week that it is suing Easterbrook. The company intends to claw back most of a severance package that has been estimated as high as $57 million, depending on the price of the company’s shares when his various stock options vest. Easterbrook was entitled to severance under his employment contract because his firing was deemed not to be “for cause,” despite his violation of company policy barring relationships between supervisors and their direct or indirect reports. When you are the CEO, even of a company with around 205,000 employees, every one of them is technically an “indirect report.”
So what happened between the former boss’s departure last November and McDonald’s change of heart, beyond a case of corporate buyer’s remorse?
First, according to the company, it has come to light that rather than a single, nonphysical and consensual relationship, Easterbrook (who is divorced) had relationships of a sexual nature, including sexting, with three other employees during his tenure. He allegedly deleted evidence – including sexually explicit images and video sent via work email account – from his phone. Investigators later discovered this evidence, after a tip, on the company’s corporate servers. The company claims Easterbrook lied during its initial investigation by denying he engaged in any additional forbidden relationships. Easterbrook also approved a stock option grant to one of the individuals with whom he behaved improperly, the company asserted, although it seems unlikely this would have been far outside the ordinary course of business. A big option grant to a low-level worker who hadn’t otherwise merited it would draw too much attention.
In addition, the company faced criticism for not stripping Easterbrook of his severance package when it fired him. Proxy voting adviser Glass Lewis recommended that shareholders reject the company’s pay package this year, The Wall Street Journal reported. The plan was approved, but the “no” vote of more than 20% of shares was probably enough to get the company’s attention.
Further, McDonald’s stock price (and the value of Easterbrook’s options) has increased since November. This despite a global pandemic that was unforeseeable when Easterbrook departed – and despite the fact that the restaurant industry, generally, has been among the hardest-hit sectors. McDonald’s robust drive-thru business has been a big factor. But so, too, was Easterbrook’s decision to create a home-delivery option through Uber Eats.
McDonald’s was not playing Santa Claus when it originally allowed Easterbrook to keep his severance package, despite his personal failings. It received a six-month extension of Easterbrook’s noncompete clause, which prohibits him from taking his talents to prominent fast-food rivals, as well as secondary competitors like convenience-store chains 7-Eleven and Wawa.
So why doesn’t McDonald’s just move on? Buyer’s remorse and the after-the-fact criticism the company received may contribute. Another reason, however, may be a corporate desire to send a message. What is that message?
As Chris Kempczinski, the new CEO, put it early this year (according to a town hall meeting reported in The Wall Street Journal), the company’s mission is not “just selling more burgers and fries.”
“We’re going to be a lot better, a lot closer to where we want to be, where we aspire to be as a company,” the new boss reportedly told employees.
But what is that, exactly – and what should employees, shareholders and customers expect it to be? Kempczinski’s remarks make me wonder whether he thinks he is running a church, rather than a commercial enterprise.
Every worker at every company, of any size, is entitled to a safe and supportive working environment. This means an environment free of pressure, harassment, hostility, and bias or favoritism. In most respects, this is a legal requirement, as well as a moral and practical one. People need to feel safe and secure to do their best work. They also need to be treated fairly.
But as I have written before, employees are people, not robots. They will form attachments and personal relationships, including romantic and sexual ones. These do not need to be destructive if both parties enter a relationship freely and consensually, without fear of reprisal during the relationship or after it ends. A rigid policy like the one at McDonald’s tends to drive any such relationships underground or to inhibit the careers of employees who enter into them. If you are in a relationship with someone in another department, one of you might have to reject a transfer or promotion that would make you the other’s direct or indirect supervisor.
Managers can, and should, handle human behavior with openness and compassionate flexibility, rather than unrealistic doctrinal pronouncements. In cases of a close personal relationship, romantic or otherwise, recuse the supervisor from decisions where real or perceived bias could come into play. Ensure that neither party is subject to pressure, or vulnerable to retaliation or other unfair treatment if the relationship ends. Send a message to other employees that personal time is your personal business, but at work everyone must behave professionally. And when two people find love, well, that’s something to celebrate and support rather than discourage.
Easterbrook knew the rules. He was responsible for setting an example, and deserved to be fired when he broke them. But the rules never made sense. Now the Church of the Golden Arches seeks to excommunicate him after he has already agreed to leave the fold.
For whatever it’s worth, when I stop at McDonald’s, I am not looking for moral guidance. A burger and fries will do just fine.
Larry M. Elkin is the founder and president of Palisades Hudson, and is based out of Palisades Hudson’s Fort Lauderdale, Florida headquarters. He wrote several of the chapters in the firm’s recently updated book,
The High Achiever’s Guide To Wealth. His contributions include Chapter 1, “Anyone Can Achieve Wealth,” and Chapter 19, “Assisting Aging Parents.” Larry was also among the authors of the firm’s previous book
Looking Ahead: Life, Family, Wealth and Business After 55.
Posted by Larry M. Elkin, CPA, CFP®
photo by Flickr user JJBers
Former McDonald’s CEO Steve Easterbrook agreed to leave the company over a consensual relationship he had with an employee. Now, his abrupt but amicable departure has suddenly become a lot less – consensual.
McDonald’s announced last week that it is suing Easterbrook. The company intends to claw back most of a severance package that has been estimated as high as $57 million, depending on the price of the company’s shares when his various stock options vest. Easterbrook was entitled to severance under his employment contract because his firing was deemed not to be “for cause,” despite his violation of company policy barring relationships between supervisors and their direct or indirect reports. When you are the CEO, even of a company with around 205,000 employees, every one of them is technically an “indirect report.”
So what happened between the former boss’s departure last November and McDonald’s change of heart, beyond a case of corporate buyer’s remorse?
First, according to the company, it has come to light that rather than a single, nonphysical and consensual relationship, Easterbrook (who is divorced) had relationships of a sexual nature, including sexting, with three other employees during his tenure. He allegedly deleted evidence – including sexually explicit images and video sent via work email account – from his phone. Investigators later discovered this evidence, after a tip, on the company’s corporate servers. The company claims Easterbrook lied during its initial investigation by denying he engaged in any additional forbidden relationships. Easterbrook also approved a stock option grant to one of the individuals with whom he behaved improperly, the company asserted, although it seems unlikely this would have been far outside the ordinary course of business. A big option grant to a low-level worker who hadn’t otherwise merited it would draw too much attention.
In addition, the company faced criticism for not stripping Easterbrook of his severance package when it fired him. Proxy voting adviser Glass Lewis recommended that shareholders reject the company’s pay package this year, The Wall Street Journal reported. The plan was approved, but the “no” vote of more than 20% of shares was probably enough to get the company’s attention.
Further, McDonald’s stock price (and the value of Easterbrook’s options) has increased since November. This despite a global pandemic that was unforeseeable when Easterbrook departed – and despite the fact that the restaurant industry, generally, has been among the hardest-hit sectors. McDonald’s robust drive-thru business has been a big factor. But so, too, was Easterbrook’s decision to create a home-delivery option through Uber Eats.
McDonald’s was not playing Santa Claus when it originally allowed Easterbrook to keep his severance package, despite his personal failings. It received a six-month extension of Easterbrook’s noncompete clause, which prohibits him from taking his talents to prominent fast-food rivals, as well as secondary competitors like convenience-store chains 7-Eleven and Wawa.
So why doesn’t McDonald’s just move on? Buyer’s remorse and the after-the-fact criticism the company received may contribute. Another reason, however, may be a corporate desire to send a message. What is that message?
As Chris Kempczinski, the new CEO, put it early this year (according to a town hall meeting reported in The Wall Street Journal), the company’s mission is not “just selling more burgers and fries.”
“We’re going to be a lot better, a lot closer to where we want to be, where we aspire to be as a company,” the new boss reportedly told employees.
But what is that, exactly – and what should employees, shareholders and customers expect it to be? Kempczinski’s remarks make me wonder whether he thinks he is running a church, rather than a commercial enterprise.
Every worker at every company, of any size, is entitled to a safe and supportive working environment. This means an environment free of pressure, harassment, hostility, and bias or favoritism. In most respects, this is a legal requirement, as well as a moral and practical one. People need to feel safe and secure to do their best work. They also need to be treated fairly.
But as I have written before, employees are people, not robots. They will form attachments and personal relationships, including romantic and sexual ones. These do not need to be destructive if both parties enter a relationship freely and consensually, without fear of reprisal during the relationship or after it ends. A rigid policy like the one at McDonald’s tends to drive any such relationships underground or to inhibit the careers of employees who enter into them. If you are in a relationship with someone in another department, one of you might have to reject a transfer or promotion that would make you the other’s direct or indirect supervisor.
Managers can, and should, handle human behavior with openness and compassionate flexibility, rather than unrealistic doctrinal pronouncements. In cases of a close personal relationship, romantic or otherwise, recuse the supervisor from decisions where real or perceived bias could come into play. Ensure that neither party is subject to pressure, or vulnerable to retaliation or other unfair treatment if the relationship ends. Send a message to other employees that personal time is your personal business, but at work everyone must behave professionally. And when two people find love, well, that’s something to celebrate and support rather than discourage.
Easterbrook knew the rules. He was responsible for setting an example, and deserved to be fired when he broke them. But the rules never made sense. Now the Church of the Golden Arches seeks to excommunicate him after he has already agreed to leave the fold.
For whatever it’s worth, when I stop at McDonald’s, I am not looking for moral guidance. A burger and fries will do just fine.
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